tv Squawk Box CNBC May 9, 2013 6:00am-9:01am EDT
cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we've been fachg the future and after another big day of gains and records, you can see this morning futures are mixed. right now, dow futures up by 7 or 8 points above fair value. s&p futures are down, but by less than half a point. the nasdaq and the s&p are on five-day winning streaks. the dow industriales and transports both closed at record highs once again yesterday. on today's economic agenda, we have weekly jobless claims due out at 8:30 eastern time. we've been watching the jobs numbers. the jobs numbers last week were better than expected. for this morning's numbers, first time filings likely rose by 11,000 to 335,000 in the latest week. also on the calendar today, you have wholesale trade coming up at 9:00 eastern time. meantime, some of the nation's retailers will be reporting their sales. thompson reuters is forecasting
a same-store increase. plus, we'll be getting some fed speak today. we have richmond fed president jeffrey lacker speaking at 8:00 eastern time. at the council on foreign relations in new york. he'll be talking about the topic of too big to fail. charlie evans makes opening remarks, and that's coming up at 8:25 eastern at the chicago fed's annual conference on bank structure and competition. and ben bernanke will be speaking at that conference tomorrow. later this afternoon, we have charles plosser addressing the economy. a lot of things that these fed officials could say. >> i want to take a royalty every time they use tptf. >> too big to fail, too big to fail. >> i would see you over at the table in a moment. facebook is reportedly in talks to acquire waze. the price tag there said to be in the range of $800 million to
$11 billion. tech crunch is now saying microsoft is offering $1 billion for the digital assets of nook media. the deal would reportedly leave microsoft with prefrerred units in the nook. and the sha phone is priced at $9 the 9. that's not bad. the company is trying to stop consumers to switching to google's android. particularly emerging markets is the pricing issue there. also, related news there, apple's supplier tegratom says it will increase number of workers in china by up to 40% in the second half of the year. the company is an assembler for the i foed phone and ipad. the news is fueling market speculation that another cheaper iphone is on the way. we've been talking about that for a long time. finally, jpmorgan says federal energy regulators are now investigating some of its
bidding practices in the power markets. the company received a notice in martha federal energy regulator commission staff intended to recommend the action by the commission. last week, you might remember, we talked about it, the "new york times" reported that the government investigators are found evidence of that unit manipulating trading in california and it was one of the big names mentioned in that case. joe, over to you. >> all right, andrew. when you get over here, we're going to bring out the jamie dimon -- i'm going to bring it up today. >> you're going to bring it up today? >> yes. >> but i brought it up in the makeup room. >> if i think it's worth bringing up, then i'll -- no, but there was a piece in the "new york times" by our friend, jeff sonnenfeld. since we can bring jeff into the equation. the world's most influential hedge fund manager res gathering in new york. cnbc's kate kelly, which is a great name.
s almost could be a country singer, really. >> my parents wanted to preserve my optionality. it was television, country singing. >> it's one syllable less. >> i could have been an entrepreneur. i think i would have gone catherine kelly if i were to change my name. >> oh, boy. how about first pet and street name? >> what? >> isn't it first pet and street name? >> when you have security questions? >> this is apprapo, my first pet was a dog named coffee. >> the street name? >> burlington place. >> coffee burlington is not bad. >> they're playing the porno music. >> yeah. >> not so used to that. sorry. we talked about investments ideas. let me just start this by
talking about some of the investment ideas that came toward the end of the day and some of the more impactful ones likely in the market today. ios, oil states international, that was a bull case from david einhorn who said he almost didn't go with it because an activist investor came out with a 13d filing recently. jana wants ois to split out their accommodations business to create value for shareholders. if they did that, the stock could go to $155 up from about 100 where it's trading now. but he thinks highly of the business. he thinks the margins are strong and could be even stronger. they have a number of high end businesses and services. there are not a lot of comp necessary this service. they basically build temporary housing for oil exploration centers around the world and there are plenty of other places they could go. jeff gunlock, and he used this as an end note at the end of his
macro discussion, he is shot chipotle. i think that's one einhorn has embraced, too. >> i'm long chipotle as a customer. >> we love mexican. >> i do, but i don't think as much as you two do. >> when i worked at midtown at the journal, there was always a long line at chipotle. >> it's a mixture of closer to real mexican, but fought quite as much. taco bell is gringo mexican. >> are you allowed to say that? >> that's a pejorative. >> let me hit two other stocks real quick. cliff robins who was on this stock earlier this week, he'll bullish khaki, the defense technology company, as well as akamai. >> we were totally on the money the other day. the ceo of akamai.
cliff didn't tell us that he loved that. >> no, he didn't. >> you were prestaging investment idea toes come. joe, you would have enjoyed it yesterday because there was a lot of negativity about entitlement spending in the u.s., a lot of talk about how we're poerm potentially insolvent. paul kicked off the day with -- >> i saw some of that. >> he basically said, here is my trade idea. everybody has to have an actionable idea. if you are long u.s., japanese or european government bonds, you should simply know the assets are flawed, their prices are distorted by 50 to 100 basis points, maybe even more, just fyi. and he put a number on it. >> and gunlock, just gunlock towards tend of the day was hysterical. he said, qe far from being a put on stocks is actually like an old game that he had as a child called dynamite shack where you put sticks of dynamite into this shack and the proof blows off eventually. he showed some graphic of that. but he says if you want to go
long stocks because of the qe, you should consider the nikkei. >> but then i saw someone said about japan that they're putting a ponzi keep on top of a ponzi scheme. >> and using words not appropriate for television. he also said he thinks the yen goes to 120. >> and he's using words -- >> like netzero. >> what kind of words was he used? >> he was saying you have to be blanking me. it's a ponzi scheme on top of a ponzi scheme. >> no "f" balls that i know of. >> it's the shih tzu. >> no, he should have said kidding. i don't know. >> they're a little -- >> we could break them down and just start using that. i mean, it is cable. >> let's not. >> all right. or not.
>> it's cable. >> but people are watching, maybe -- >> it's inappropriate, i think. >> geez, if my 13-year-old ever heard that word, i don't know what she would -- >> setting a bad example. >> she knows that word. >> my son dropped the "f" bomb in the car the other day. >> how old? >> i said, why did you hear that? he said, from you. and i was like, what? i thought i was so careful. >> yeah. kids say -- you can't acknowledge that they know it and -- i don't know. it's all a big game. sort of like that conference, right? akamai, i'm excited, though. >> yeah, you were saying that. >> the ceo was very positive when he was on. >> yeah. essentially he expects to see growth over the next couple of years in their core businesses. but, you know, technology was definitely a theme yesterday. it was sort of a macro theme that i touched on. and technology, both long and short ideas. stan druggenmuller says google
is his number one policy. one thing he likes about them is limited exposure to china. chanos, speaking of people bearish on china, is focused on seagate and western digital. >> stan is still bullish based on the fed near term, but long-term he thinks -- would you say 90% of the people there think that the fed is doing the wrong thing? >> i would. in fact, there's -- it's almost risble how the anger -- or they're past the point of being pressured. gunlock had a signature of ben bernanke resting his head on his hand. he sort ott has one finger raised. just so much talk. >> think if japan had said we're going to keep doing 85 billion a month until we hit 2% inflation. it would have been 20 years of 85 billion. a month. >> to be fair, though, people also called out congress and the
president for not doing more. i mean, i think it -- >> i don't know. what do you want them to -- entitlements won't cure the -- you know, the near term growth problems. >> right. and i think it was singer who said, look, the fed did what it needed to do in the way one of the crisis. at this point, though, they need to go to congress and the president and say we've done enough. >> budget cutting. >> budget cutting. that's for austerity. >> right. but what can i tell you? >> no. einhorn, do we think less of him because of gold? or analyzing meaning or what was that insurance company? was it alliance capital? >> mbia. >> but there was -- allied. >> allied. that's different than knowing what gold is going to do. >> but i don't think he -- i mean, you -- >> for gold? i do. i mean, if i could figure out was coming down, why couldn't he figure it out? >> because i think when you're an investor, you're going to have some hits and you're going to have some misses.
>> when he came on the air a couple months ago on apple, it was 500, 600, 700. it depends when you had gotten in. he had gotten into apple about a year earlier inspect. >> i think he gets credit, actually, for helping to spur some of the balance sheet management there. i mean, who knows, they may have had it in the works already. but i do think that public pressure -- >> oh, no, i think that's absolutely right. i think unfortunately, though, shareholders watch him talk about it and got in late. in right. >> thank you. >> thank you. >> let's talk a little bit about -- excuse me, a little bit about global market news this morning. >> that takes forever. >> you read. the bank of england is going to make an announcement on interest rates coming at 7:00 eastern time. the bank of england is expected to hold fire on additional easing. we will see about that. and in asia, south korea's central bank cut interest rates for the first time in seven months today. this came as a surprise to the markets and policymakers are
trying to maximize stimulus efforts there. key economic data out of china today, and one of our favorites. eunice yoon joins us from beijing with the latest. good morning. >> good morning. we are focusing on the producer price index as well as other consumer price index. people are really concerned about the producer price index because of the fact that we expected to see a decline with the pti. but just not as steep as what we actually got. it was down by 2.6%. a lot of people are talking about how that really highlights the problems that the factories are having working through all that inventory and also struggling with excess capacity. people are talking about how the demand is very weak. now, with the consumer price index, you saw the consumer prices rise slightly by 2.4%. but what people are really talking about is the fact that the vegetable prices were
pushing up the prices. but if you strip away a lot of the food prices, the core inflation is still very weak. and, of course, this set of numbers really comes on top of the trade numbers, which also let's a little bit -- people were talking about how great they were. they were just throwing away numbers on wednesday. but they've been raising a lot of concerns today about whether or not these numbers are distorted because companies have been overinvoicing. now, another big story that we've been talking about here today is the fact that the solar panel industry in china was hit. and that's basic "the wall street journal" has decided that the eu has decided to slap tariffs on chinese solar panels and this comes after a similar move by washington and the solar panel is struggling with
oversupply. and the markets, the u.s. market, as well as the european market are really the key major markets for solar panels. the companies that i've been talking to say they're really worried about the outlook for the u.s. market for them as well as for the european market essentially with its latest news. >> eunice, thank you very much. great talking to you and we will talk to you again soon. when we come back, a money manager who says that bonds, stocks, are the investment toes be exploring right now. that is different than we've heard from a lot of investors lately. in news outside the world of business today, prince harry will be arriving in washington to kick off his seven-day tour to the united states. a visit to super storm andy ravaged shores is on the itinera itinerary. [ female announcer ] what if the next big thing, isn't a thing at all?
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u.s. equities at this hour are higher. they are mixed. continued new records. right thou, the dow futures are up by less than 4 points. s&p futures down by less than a point. we'll see where things head as we get towards the opening bell. in the meantime, why don't we get a check on the national forecast from the weather channel's reynolds wolf. good morning. >> good morning, guys. how are you doing? got a lot to share with you weatherwise. let's get started where you guys happen to be. the northeast could see more rain today, not quite as heavy as what you had yesterday. yesterday was nuts up there. pleas ynt conditions across the south. showers and storms in the central plains and back out to the west within we've got a bit of a warm-up and plenty of
sunshine in spots like seattle. giving you a sneak peek on the weekend, so cool and relatively drive in the northeast. still warm out towards the west. now, in terms of travel, are we going to see backups today? yeah, we could see. and mainly in three locations. the place where we might see backups would be in new york, chicago, and even in dallas. best chance to see the backup necessary dallas will come later in the day. the atmosphere becomes unstable by late afternoon. could be possibly moderate to severe depending on the point of storms. let's send it back to you guys. >> reynolds, i've been chasing bad weather around the country, first out in omaha, then back here. when does this rain go away? you are just a magnet, aren't you? >> i am. >> it should be better by monday. for parts of the northeast, it should be better. i know, through mother's day weekend, you're going to have the showers. but with the dryer weather, it's going to be a lot cooler.
you can leave those mild conditions, highs in the 50s and 60s by monday. >> boo, reynolds. thank you. in sports news, the miami heat evening their series, a game apiece last night. the heat leading by as many as 46 before a route of the bull. chicago was called for six technical fouls. in the we were conference semifinals, golden state evened things at a game apiece, as well. in nba news, george karl was named the coach of the year, leading the nuggets to a game record 57 wins this season. golden state eliminated the nuggets from the mayoff last week. it's the first time carl has won the award in 25 seasons. earlier this week, hopefully you were watching and is warren buffett told us when it comes to putting capital to work, equities are the place to be.
>> i would have productive assets. i would favor those enormously over fixed dollar investments now. and i think it's silly. to have some ratio like 30 or 40 or 50% in bonds. bonds are priced artificially. that will change at some point and when it changes, people could lose a lot of money if they're in long-term bonds. >> and i guess that's the operative phrase, at some point, because it's been years that people have been saying it. bonds are continuing to do well. let's talk to bob lutz and jeremy jenkins. jeremy, you'd have to be negative about the future of the world to continue to say bonds are a good idea. wouldn't you? >> well, i'm not certain you have to be negative about the future of the world, but for certain, you know --
>> why would rates not go up if the global economy does -- goes back to performing like it used to? a little better in terms of growth. if we did 3.5% here, if europe recovers, asia recovers, why would bonds stay at zero? >> yeah, but, joe, we're not doing 3.5% here. so if you look at the last four quarter of gdp, the average is 1.8% growth. >> why is it unfair to say you'd have to be negative about the growth of the world to be positive on bonds, then. >> well, okay. so we are actually very positive on bonds right now. in contradiction to a lot of market participants. >> and you're negative on growth, as well? >> we think growth is going to be anemic. we think u.s. data is less robust than a lot of market participants are anticipating. and we think that qe continues for a very long time, perhaps longer than a lot of participants are anticipating, as well. >> sounds like a bearish scenario from the economy to me. >> well, it doesn't mean, however, i would never disagree
with mr. buffett. he's a legendary investor. >> you don't want to disagree with him? >> i don't want to disagree with him. >> not cooperating at all. >> what i want to say is there's no reason this particular market where you can't have bonds as well as equities do well at the same time. at least for the intermediate time period. >> we've made the case that normal asset allocation of 60/40, presumably at the end of a 25-year bull market in bonds, what maybe you don't do 60/40. does it make sense to you, rob, to do 60/40 now or something less on bonds? >> as far as bonds, i think we're not in the ninth inning on bonds. we're in extra innings on the bonds bull market. i think we're at the beginning of a period of time where bonds are going to look like a poor investment. it's hard to know exactly when the fed changed its tune. i think we're one jobs report away, maybe a $250,000 -- 250
employment jobs report from a serious change in viewpoint. all you have to do is believe the fed is close to exiting. and i think bonds are very, very difficult. i don't understand how anyone can look at this economy today and say we're not recovering. the innovation that this economy is starting to leverage on is really spectacular. one thing that hasn't been talked about is energy. this new fracking and horizontal drilling is driving down energy costs for the u.s. is has really reinvigorated a whole industry. projections are we may be the world's largest energy producer by 2014. >> to be fair, i've seen the cabot letter for 15 years and it's all about stocks. how long have they been saying bonds are a crappy investment? at least five years, right? >> no. a couple of years. i think we've been cautious, you know, for a period of time. but early, like most people, i
think it's very hard to go against the fed. the fed has an awful lot of power. however, the fed, you know, can't control it forever. and they will exit and when they exit, bonds are going to be in tough shape. >> is there any way to get any yield? i mean, you don't have to say in ten years. can you go up the curve and buy some corporates or would you go all the way to high yield? >> the high yield as certainly performed very well the last three years. if you look at what it's done in the last 52 weeks, it's up in a total return environment. >> do you think it can do that again sflp. >> i don't know if it can do exactly that, joe. it can have a decent performance this year. and i think more of the risk is when people ta don't understand high yield get into story credits. so they're going down into the triple cs and maybe their asset allocating there without doing all the due diligence. and i agree with rob to a certain degree. that the real risk here is what i call the 500,000 number. and it's when we wake up one day and we have a jobs report that's
500,000 instead of what we were speccing, 200,000. >> that's a quote from me, i'm not betting on that anytime soon. >> me in, neither. >> rob, what are your favorite stocks? just to play the fracking phenomenon, what your favorite stocks? >> i like innovation in transportation today. tesla industry webs that's one of our favorite stocks. >> what is it? >> tesla, you know, the elon musks company. i think this is a game changer industry. and tesla has proven to have the goods. and i think it's possible that down the road a battery could take a car 1,000 miles in one charge. if you think about that, could that compete with the car oil driving today? i can it could. i think you need to look for new innovation. that's certainly one. i like health care names were an intuitive surgical. that's a company that has done very well.
it's probably not early in its growth phase. those are the companies i look for. >> great. robin, jeremy, thanks. appreciate it. >> you guys agree more than -- >> too much agreeing. i don't like that. >> we have a guy coming up, though, call it the appetizing indicator. what corporate marketing tells us about the state of the global economy. the head of ad giant wpc is going to be joining us in studio. good morning to you, sir martin sorrell. >> people who know him call him sorrell. >> they do. >> someone said sorrell. >> they do. good morning. >> don't let them get away with that. >> okay. as we head to a break, take a look at yesterday's winners and losers. we'll be back in a second.
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welcome back to "squawk box," everybody. what's the advertising market telling us about the global economy? joining us right now is sir martin sorrell. he's the ceo of wpp. it's great to have you. >> good morning. >> we know you love us for that. you come in for that. we want to know what you're seeing around the globe. what are you, in 110 different countries around the globe? >> yes. >> so you have a very good idea of how the advertising market is
head postponing. >> right. >> what do you say? >> it's sort of steady. it's a bit of a slug in the west and the growth markets to the south to latin america to the southeast in africa and the middle east. the middle east is patchy, but overall okay. and, of course, in the east, in places like china and india, it's still much stronger. geographical, you have a very different picture. one of our competitors woke up to the fact it's been a free speed world for about the last four or five years. certainly since layman. we've had different rates of growth. but it's sort of slow and steady. it's a bit of a slog. and it's what i describe as hand to hand combat in terms of our industry. it's highly competitive. and slow growth. from a functional point of view, the big area of growth is digital. and to some extent, media climbing by. so clients are looking at the biggest lines in their pnls, which is their media investment and seeing how they can optimize that investment and lower the
costs and be more efficient. so negotiating with media is becoming more and more important from our clients' point of view and our point of view. so net-net, there's a bit of growth in the geographic markets and there's a bit of growth in digital and media. the rest of it, theically the project businesses and what i would call the discretionary spending businesses are under pressure. >> you know, we look at advertising. it's probably more of a lagging indicator. when a business lays out their plans for the year, the spring swoon we've heard about from our ceos, have you seen that or felt that? >> no. we got our flash numbers for april and they're a little stronger than we thought. so we're budgeting this year a 3% like for like growth. we indicated in the market the understand of q1, we thought it would be better. this is like to like excludeing acquisitions and currency. this year we'll have a tailwind in sterling because sterling has been generally weaker and looks like it will be weaker than
other currencies. net-net, what we're seeing is that sort of level of growth. i think we are a need indicator of the downturn and a lagging indicator of an upturn. so then people are uncertain about the future they cut and they're seeing an upturn, they'll wait. they will be a little bit cautious. you know, this average life of a ceo being about 4 1/2 years worldwide, maybe 3 years, 4 1/2 in the u.s., two years for a cmo. average life of a chief marketing officer is two years. it's not a level of uncertainty. corporate governance coming on cnbc and having you intensively grill us on our results. that makes people very cautious. m&a market has not picked up to the extent people thought it could be. and buybacks and dividend increases are the premium strategies. >> we've had a number of advertising disrupter types on the show recently. would have been doing a lot of digital stuff. i know you are a disrupter.
>> the legacy disrupter. >> if you could advertise in one place right now -- and i'm not talking about digitally, broadly, i'm talking about actually a website, a company besides, of course, any nbc universal property that is. what is the most effective place right now, dollar for dollar, bang for your buck? >> you're going to get me into deep doo-doo, aren't you? i'm not ducking your question. the answer is it has to be a portfolio. you can't select one. having said that, if you said to me which is the digital company that's leading the way, i would put google and then amazon probably in the vanguard. google because it's in the five areas. it's not just search, it's display. it's not just display, it's video. it's not just video, it's social. it's not just social, it's mobile. so it has its five-legged stance and it's well suited. other companies like apple and amazon are trying to emulate it.
but at the moment, if you look in terms of market share, in terms of growth, google is where the game is at the moment. so that will be a go -- search would be a very important part of everything we see. now, one of our biggest issues we saw this week, he said to me i'm spending 25% of my budget. 25% of my budget on digital. i want it to be 50. you've got to help us get to 50. so we are seeing the switches. >> the rest of that is coming from where? >> pardon? >> if he's spending 50% -- where is it going to come from? firstly, probably an increase in the budget, but a reallocation from legacy. it's not all bad news from legacy media. they're a game, too. they're trying to turn analog into digital pennies. the monetizing it is difficult. so there is a switch taking place. and the legacy media attorneowne
to grapple. ten years ago, zero percent of our revenue came from digital. today, it's 34%. >> the telegraph, is that a tabloid? >> it's not a tabloid. the barclay brothers own the -- >> what do you think of it? do you believe what it says? >> it tends to be the sort of newspaper that you would read in the uk. >> china may not overtake america this century after all. this is a headline. doubts are growing about whether china can pass the u.s. to become the world's biggest economy, which everyone thinks will happen in ten years, and that the country's 30-year miracle is nearing exhaustion. any possibility that becomes -- >> i would tend to -- not about the timing, because i think it will take a long time for china. >> longer than -- >> well, there's 16 trillion for america. china is about 8.5 trillion. it's a long way to go. on a per capital ya basis, it will take even longer. america is still the key to the world economy. if america sneezes, he we still
catch cold. having said that, i think the chinese miracle, which you first came into contact with in -- >> slowing. >> you say slowing, joe, it's still going at about 757%. >> the rate of growth is slowing. >> yeah, but so is the world's rate of growing. >> this says the 30-year miracle is near kaufton. >> i disagree with that. the chinese leadership plans extremely well. we don't plan as well. when i say we, the west doesn't plan as well. i think a funny way -- maybe not such a funny way, but in a serious way, i think we have a lot to learn from them. the new leadership from what i've seen of it, firsthand and secondhand, it is extremely knowledgeable. they won't move because they were put in place by the old regime. they're not going to signal any significant change i think for a couple of years. but that change is going to be significant. >> there are people that think central planning if you read any real -- >> it goes against the dna to
talk about planning, but we would like a little more planning in the u.s. wouldn't we like to see congress and the president be a little bit more aligned about where they're going rather than be in continuous dispute? >> that's why we have three branches of government, to make sure we don't move too quickly on everything. what if we had done all those ideas that europe had? >> not the whole of europe. i mean, you know, coming back -- >> you guys -- >> well, we're in the process of deciding whether we're going to be a member or not. >> no, you're not. >> i'm not so sure you're right. >> really? >> well, there will away cyclical turn in europe by the time for that referendum in 2015. >> you're gambling on a -- >> i would guess that we'll still be around in '16 and '17 as the european economy cyclely starts to improve. structurally, the question is -- i mean, spain is starting to show a little bit of -- >> we'll save the faith and have this conversation. >> the obama prediction.
>> all right. thank you. >> thank you very much for coming in. >> thank you. treating me a little lighter than you treat others. >> you keep investing in media and i don't see what is the big strength in meteors. i'm not really sure. anyway, coming up, what some are calling a jamie dimon witch-hunt. i don't even understand the point you're making. but managing expert jeff sonnenfeld on the story. >> meteors. [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements. ♪ ask your financial professional how lincoln financial can help you take charge of your future. ♪
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all the time. joining us now is yale management's jeff sonnenfeld. he has an op-ed in today's ""new york times" called the jamie dimon witch-hunt. good morning on to you, jeff. >> good morning. how are you, andrew? >> you come out swinging in favor of jamie this morning. make the case. >> well, you know, it's really a shame. here is a company where the stock is, you know, way up where it was where they had a setback, obviously, last spring. the london wales trading fiasco is nothing to brag about, but people who are toughest on them, jamie dimon himself, they had a mistake. anybody in business is going to have an error. and look how they've recovered from it. record profits. the stock was, i don't know, 41, 42 before this fiasco last year. now we're up around 50. it's an incredible return. he's just being made a
scapegoat. as the whole cohort of prominence ceos right now are. we had a generation of ceos hiding from the public and now you can see why. >> jeff, are you philosophically against splitting the chairman and ceo roles from a governance perspective? that's what you do. and a lot of people think that's the way we should be moving. >> no. it makes sense in a lot of cases. the person you just had on before the ad, martin sorrell. it's sir mirtin that splits the role. it works for him. he's a very charismatic founder of wpp. but phil nader is his chairman, a nonexecutive chairman. it works very well. it's worked, you know, in a strange way it worked for hp this spring to have ray lane innocently take the hit to run cover for meg whitman who also did nothing wrong so she could focus on running the company because they found the iss complained the last ceo wasn't
sufficient skait scapegoating for accountability so look for somebody else to take out. so the chairman, ray lane, magnanimously and happily stayed on the board. it can work in certain circumstances, you know, at the "new york times." the chairman suffered from the ceo. at ford motor company, off dominant family stage. it makes a lot of sense. the bomber transition at microsoft with bill gates. it can make sense. it's not a panacea. there's no research out there. in fact, just the opposite of what the research says. >> jeff, i'm going to ask you because it's important here. do you have a consulting relationship with jpmorgan? >> no. i -- i -- and nothing has been suggested coming out of this, either. i have known jamie only tan gently for a long time. >> actually, jeff, we're actually on the same page in that we agree, i think, on this. and i think joe, we've all agreed that it actually feels like a witch-hunt. but at the same time, you should know on your website, on your bio, it says that you do
consulting work for jpmorgan and i wanted to clear that up because we had a couple of people tweeting in about it. >> you know, that happenless pooi bio, i've done a talk at some place everywhere. probably under some pres predecessor ceo. but jamie dimon has never hired me for everything and i have gotten no personal money from jpmorgan, at least for 20 years that i can think of. >> jeff, i'm happy then to clear that up. thank you for that. we appreciate it. >> of course, it will appear, but i can't think of decades where i've gotten any compensation personally from them. >> good to know. great to talk to you. thank you for waking up early and it's a great op-ed that's worth reading this morning. thank you, jeff. when we come back, learning from the pros. we're going to talk golf and investing right after this. and then at the top of the hour, our newsmaker of the morning, blackstone chairman and ceo steve schwarzman. [ penélope ] i found the best cafe in the world.
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welcome back. we are learning from the pros this morning as the players championship kicks off in florida. you need to stay cool under pressure to win at tpc saw grass. as you know, we saw so many things happen on the closing hall. joining us is mark travis of intrepid capital management. and senior writer on the golfchannel.com. rex, we're doing a lot of stuff
together. we're coming down to the open this year. and i think i may have planned something on the money, the money before the open. do i have to play marion? maybe i'll just walk and not spoil the walk. a good walk spoiled. >> that's a good idea. i had a chance to play marion a few weeks ago. i play golf for fun. that golf course is not fun right now. >> they had to move the putting green to make the one hole 800 yards, par 4. >> number 14 they moved it back four yards. it's going to be an interesting test. >> anyway, the demos for our audience and for the golf channel, the overlap is incredible. that's why we do these segments on the similarities of golf. i want to ask you, mark, you make good points about investing. it's hard for people if they buy a position to have the -- you know, if it goes south on them. it worked for you to combine
more. but that's hard to do, right? >> absolutely. i think it's as much behavioral finance as anything, he joe. managing your emotional state is difficult. really in august 11 we have had low volatility. the market has been up the last 18 months. that will change at some point and it will become more difficult i'm sure. >> how are you feeling after the series of new highs? is that a good sign that people aren't getting that excited and volatility is low? are we setting ourselves back for a pull back? where are you eventually on that? >> hard to believe i've been in business almost 30 years. and i can list a string of events that came out of the blue from almost the '87 crash to the tightening by greenspan in february of '94.
russian ruble, on and on. the opportunities so far as mispricings are when the volatility is highest. we're looking for mispricings. an environment we have had here recently there's few and march between from our perspective. >> at this point are you permitting new capital to the stocks that you like. or do you like to buy them when you get cheaper. >> we obviously like them cheaper. you know, we are finding a few things here and there. they're not a wholesale, a lot of businesses we like at six to eight times operating income. we have a lot of cash. we have our grocery shopping list we two into the market every day looking for a disconnect between the current market price and what our
private market value is. so we have high level cash. if something goes bump in the night, we will be ready to spring into action. >> before they hit marion in a basket and on the fly. do you have three guys that you think are dangerous? >> managing emotional state. i'm going to go tell a lot of guys on the range that's how you need 17 at saw grass. 140 yards. a lot of risk/reward. i go back to 2011 when choi and toms. ended up losing. he showed resilience. came back next week and won at colonial. >> i have seen a lot of guys, a lot happen at 17.
we have to gap it here. maybe we will get to meet you in person at some point. thank you. appreciate it. steve schwartzman from black stone. the markets, the deals all coming up. [ female announcer ] there's one thing dave's always wanted to do when he retires -- keep working, but for himself. so as his financial advisor, i took a look at everything he has. the 401(k). insurance policies. even money he's invested elsewhere. we're building a retirement plan to help him launch a second career. dave's flight school. go dave. when people talk, great things can happen. so start a conversation with an advisor who's fully invested in you. wells fargo advisors. together we'll go far. we used to live with a bear.
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for the players championship at tpc saw grass. the second hour of "squawk box" begins right now. good morning, everybody. welcome to "squawk box" on cnbc. rates unchanged. we have been watching futures this morning. after new records that were set yesterday, take a look this morning. at this point the equities look mixed. futures show that the dow is up by six points above fair value. s&p down less than a half a point. let's get to some of your morning headlines. costco says sales at stores rose by 4% last month. that was below what the street had been expecting. they were looking for 4.5% rise. lower fuel prices, which costco
sells at many of its store. and stronger dollar added up to hurt results. home repossessions fell from march levels. 32% drop from a year earlier. foreclosure starts were down 28% from the year before. japan's sony reported a profit of $434 million for the fiscal year ending march 31st. that is the company's first annual profit in five years. much came from a weaker yen. it helps boost overseas reports. $5.7 billion during the prior fiscal year. blackstone co-founder launching a $3 million scholarship program in china. the single largest fill hand thropic gift. he is here. you can touch him. there he is.
>> great. >> he must be on the china time zone. usually you're exercising or sleeping, right? >> well, that's true. but i'm here today. >> we want to talk about the scholarship. but i want to talk about the markets just briefly. your colleague -- not colleague but peer in the business a week and a half ago, leon black, said he is selling everything that is not nailed down. the perception being that we are at a top or the the market is topping. what do you see? >> leon is a big credit player. and credit has rallied enormously. most people are hung up on credit. to the extent it reflects the leverage imbedded in certain companies it is probably not an unwise idea. nevertheless there's going to be more growth in the u.s. economy. whereas leon is pretty much right. there are opportunities with really good companies to keep those companies and keep them
growing. >> when you see the dow over 15,000, do you say to yourself, this makes sense? it's going to keep going? i know you don't play the public markets per se but you often take public companies private. >> we have come a long way. we have done it through modest economic growth. decreased level abroad. but the dominant factor is really record low rates virtually everywhere in the world. i think that will probably stay that way for some period of time. whether that's a year. whether that's two years. but unhappy long-term credit investors when that changes in a material way. >> you are making a serious distinction between equities and credit-related exposure. i think that's really important. if you used black's statement to
gauge the dow jones or the s&p, i think you're drawing the wrong conclusion, aren't you? >> he's a smart investor. a lot of his companies increased dramatically. you have the bulls and bears and pigs thing. so he can take profits. investors will be happy if you leave some stuff on the table. it's not a global tragedy. >> are you as concerned about qe as all these guys yesterday? it's a huge red flag that we're doing this wrong, we're building up something that's going to be really tough to deal with? >> i don't have as much concerns as some people do about that. i look at this from the perspective of the size of the fed and what it was doing when the crisis started. u.s. fed was only about $800
billion. and citibank was about 4.5 times the size of our entire central bank. that seems a bit odd to me. and the idea that it is now 3 trillion and citibank is down to around 2.4 still doesn't seem like the central bank is massively scaled to the size of the us banking system in total. >> let's talk about the scholarship for a moment. it's a $300 million scholarship. you put $100 million in, raised another 100 million already, and on your way to raising the last 100 million. you have an advisory board. the names, i think we might have a screen where we can put up some of the names in a moment. how did you decide to do this? >> well, it's an interesting thing. i'm on the board of their business school, one of the top
two universities in china. and the president of the university approached me a few years ago and said they would like to get more foreign students, would i have an interest in helping them. obviously i wasn't sure. i have a lot of things in my day job. and i thought about it. they were trying to celebrate their 100th anniversary. the 100th anniversary came and went. i didn't really pursue it. a year and a half ago they had a change at the top and a new president came to see me and said what do you think? i saw a complete stalling out. china was growing three times the rate.
there was this tension, anger. eventually it gets directed toward the winner of the game. you can continue with this type of approach for very long, let alone for decades, you were going to have acting out, anger, unhappiness and potential for trade tensions, economic tensions, military tensions and you can see that happening already. because china and japan almost instantaneously. i was looking for a way to defuse and deal with this problem on a general racial basis. and i was trying to figure out how you can attract great students, to learn what they're doing so they can go back to their countries and interpret
but feedback to china when they were doing something that didn't seem to make sense. what i did was just thought about the program and the enormous impact that the roads with 84 students a year has. and you look at what bill clinton has done by way of impact. if you go through the list of those people, it's pretty remarkable. so i figure if we could attract the same caliber of people to go and feedback in their societies this is a good thing. that's how it happened. >> i read the great line at the end of the "new york times" article that you had collide for a rhodes scholarship. >> i did. i didn't get anywhere. i don't know what that says about me. it may have been good judgment.
it turned out to be credital years in the history of finance. it's a really good thing to attract people, to learn. i would say a little sentence about china is no longer an elected course. it's core curriculum. you know that on this program from covering people around the world on a regular basis. but most americans and most europeans don't spend their time thinking about the second largest economy in the world. >> right. >> and the largest populus country in the world. >> i find any time anyone is cynical about philanthropy, it's ridiculous. i got upset two years ago when everyone was giving mark zuckerberg a hard time. they said he was distracting from the movie or whatnot.
you may have read some. you made this great contribution to china and blackstone does a lot of business in china. the chinese government invested in blackstone. just respond to it. it's worth because there is all this stuff out there even though personally i hate the whole idea. >> actually, andrew, there's not so much stuff, which is surprising. what i would say is we have a terrific relationship with people in china. and nobody needed to throw $300 million on the table trying to get somebody's attention. it's not exactly geographically close. it is halfway around the world. so this involves conference calls, videos. at night, very early in the
morning. it's not the easiest thing to achieve. so what i would say is this was just a situation, opportunity presented as a result of some of those factors. in that sense it was a happy accident and gave me the opportunity to marshall resources both financial and educational because there were a lot of great academics around the world. >> when does the program start? >> it starts in june 2016. >> and the first students will be from what schools? >> well, you know, we're going to have 20% chinese kids, 45% from the u.s. and 35% from the
top 20 economies of the world. so we will probably start at less than 200 students. we will get to 200 as quickly as we can. that will give us 10,000 students for a lifetime. if you'll imagine 10,000 really unusual people. and it doesn't have to be a leader in politics. it can be politics, business. and the media. so when you got really immersed in what by that time 20 years, it seems logically china will be the largest economy in the world. it will be an interesting phenomena. >> will you stay? >> will i stay where? >> we're going to do a break and then come back. >> thank you for answering that question and thank you for being here, the charity.
it's an extraordinary thing. we will come back. >> we will talk more about -- i want to show new telegraph article that i showed about the 30-year miracle nearing exhaustion. comments, questions about anything you see here on squawk, e-mail us or followous twitter. more to come from steve schwartzman after the break. and the dow climbing above 15,000. i don't want to jinx it. we will hear from market historian and andrew's words, permeable. plus, bay barry knapp.
>> welcome back to "squawk box" this morning. take a look at futures right now. see how the market is setting itself up this morning. dow looks like it opens up a point. nasdaq by four points. >> all right. steve, a year ago -- or last year you opened a new fund k5u8d the tack tal opportunities fund, $1.25 billion fund, backed by
money from calpers. you're invest anything alternatives. that's probably something we will need to see a lot more of. they can't get the returns they need from the bond market because of everything the fed has done. how is that going so far? >> that one is really going extremely well. we were trying to hit mid-teens returns. and mid-20s. if you're going to make a mistake, that's the type you should be making. what's interesting about that is that particular vehicle invests in all of the alternative asset classes depending which seems to be the the best at the moment and how things are moving. and that includes private equity, real estate, credit, hedge fund oriented type of
investments. usually almost everyone who invests invests just in one area. if you're a private equity investor, real estate does real estate. hedge funds do hedge funds. credit does credit. there's a feeling that when you stray from what you're doing somehow you have something called in the trade style drift. and you will do badly. that is not actually the case if you have world scale experts in all four businesses the way we do. each one of those areas for us is either the biggest in the world or close to it. >> what percentage is private equity now? >> private equity is around 25%, 30% of the firm. we're about $218 billion. right now we have been growing
around 27%, 28%. one of the most extraordinary things -- i actually didn't know this. we were preparing for an investor day friday last weekend. we've raised $96 billion in the last two years. as much as our next four competitors together. and what's happening is that the alternative class is growing quite rapidly because the returns are so much higher. they're averaging for a firm like ours, 1,000 to 1,500 basis points higher than the stock market. if you invest in the types of things we do in a pension fund you can get 7.5%, 8%. they are similar tpaoeug the number of people they do business with. more money going into the class. more coming into fewer managers.
in effect, we're the largest in the world doing what we do. and more come money coming from us. >> i have a half hour worth of questions for you. we only have a minute? is that true? anyway -- so there is a telegraph piece -- china may not overtake america. my question to you is going to be, if we've been taught -- and you are a success story entrepreneurial, free markets. i know you have a love for that. and you probably do central planning sooner or later comes home to roost. or is china really more capitalist than we are now? is something coming home to roost? >> there's always a dynamic. we destroy almost as many jobs as we create. it's the nature of the economic
dynamic. if you create a few more, that's your growth in jobs. but it's not frozen in time. nor is it in china. and their economic model involving sort of the whole expert-led low cost jobs, economy is being challenged obviously. as the west isn't buying as much their products. they're not growing as fast. and people are getting richer there. and wages are going up. so they're going to have to adapt. and the thing, joe, that's interesting is people talk about it openly. they have their next five-year plan of developing more consumer-oriented thing, developing the interior of the country. i guess it was about two weeks ago they were talking about developing their services. and i met with somebody very highly placed in describing where they're going to do that, how they're going to do that, why they're going to do that.
and one never knows in the long term how successful any system is. but they certainly understand that just by replicating what they used to do is not a winning hand. >> they have the manpower for services industry, i think s. hell of a service industry. >> they have the woman power as well. >> yeah. you'll come back? >> so many questions we want to ask. i wanted to ask about dell. i want to ask you about the theme work. it's worth 10 times what you told it for now, universal. >> that was maybe not the wisest one we ever made. we started harry potter. >> brilliant. it doubled jointly. it doubled the profits of the
park. people were waiting 10 hours. >> i waited. there were like 50 people in the line. >> we were only allowed to exit it every three to four years. part of what we had to assess, and it was a buy/sell. it was a very complicated exit. when we had this immense increase in value do we take that opportunity for whatever it was, six-month window, or wait four years later to see if people had gotten a little tired of the traction. and we start of looked and said with a four-year run it's probably conservative since it already had doubled.
meanwhile, we are still the second largest owner of theme parks. we took seaworld public. >> i saw the picture of you and marco rubio with the penguin. >> that's true. i have one with a sea lion now. we took our whole lp group down there. seaworld is amazing. we're opening a new pen quinn attraction. you and your children could shoo not miss that. >> two things. we bought ourselves time with the answers. do you want to weigh in on the jamie dimon debate. you are chairman and ceo. do you like it that way? >> well, you know, one of the fascinating things, this whole division of responsibility,
virtually every financial institution who got into not just trouble but insolvency was organized exactly with this organization al form. >> europe. going swimmingly over there, isn't it? >> i support keeping jamie as ceo. >> but you want to split. >> i just told you i didn't. what's wrong with you? >> leaving jamie aside as an object of discussion, when you have an approach that's structural that seems to result in enormous damage when an industry gets in trouble, just that situation which is a european style has not shown, or any evidence that i know, that it's ultimately providing protection which is the objective of the exercise. and we have not operated that way historically in the u.s. we now have directors who can
perfect very much that same function that if the company is not operating right, the ceo is not doing that well. the lead director can mobilize forces. so i think this is like a moment in time, if you will, for whatever the circumstances around this one particular case. but i'm more interesting in the structural situation rather than the individual. >> now we really do have to go. >> thank you very much for joining us. >> if i can do one thing, becky. if people want to know about the schwartzman skarls, like us on facebook. we have a website wwb.schwartzscholars.org. >> we will tweet it out on the commercial break. >> when we come back, news from fannie mae. and the raise to dow's 16,000.
how much further does this market have to run? how you can win the market's next challenge >> up next, yoko ono and mantle cal music bus. [ driver ] today, my ambulance knew all about a bike accident, just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. nespresso. where there is an espresso to match my every mood. ♪ where just one touch creates the perfect coffee.
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how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪
welcome back to "squawk". breaking news. fannie mae out with news. diana joins us from washington with the details. good morning. >> good morning, andrew. fannie mae reporting pretax income for $8.1 billion, the largest quarterly pretax income that the company ever reported. it comes out after q4 record earnings. they are 8.1 billion in earnings. that's not even the biggest news. they are saying improvement in fannie mae's financial results are allowing them to release $59.4.6 billion in valuation allowance on deferred tax assets. so they add that 50 billion. since they have to pay everything they get to the treasury and profit, they will
be paying the treasury $59.4 billion, bringing their total payments to the treasury so far to $95 billion. that's in cash dividend payments. you will recall they took $117 billion in draw from treasury. this is not as if they are paying that back. those can't be paid back. they isn't have to keep paying all their profit to the treasury. they could obviously in the next quarter go past. biggest profits in the company's history due to this new book of business. they are the only mortgage game in town. it will bring up a lot of what you do with the now incredibly profitable fannie mae and freddie mac. >> that is pretty did. >> this is like a feel-good story. >> this is a great story. the fed is on permanent easing
with qe. and fannie and freddie are back. let's call mark faber and see what he thinks. they're out spanning greenspan. it's really working well. everybody should own a house i think. don't you? are we doing it again? can you imagine how easy the fed is and everything is being guaranteed by government agency. that part is true. >> yeah. >> do you really need to work to get a house? do you know an address to get a house? is it really that important? it's not. if it's going to go up in value, it doesn't really matter. we need 80% home ownership. we're going to do this again. >> yeah. >> did you not think of that? >> no, no, no. i was thinking this is a bad -- i wanted to say brought to you by ben bernanke at the bottom.
>> i know you like the book that you're going to write as a sequel to this one. another visit to the golden globes, more stars? if it happened? >> very clever you are. we're an hour away from the weekly jobs report. initial jobless claims. economists are looking for up from a five-year low. facebook may be close to a deal to buy waze. a key bragging right for tesla motors. the model s scored 99 out of 100 in a new rating from consumer reports magazine. it's the first electric car to
match that. it performed as well as any ever rated by consumer reports. that comes on the heels of tesla reporting first quarterly profit in its 10-year history. so they have a lot to be happy about this morning. people had all those reviews. i think the "times" had a review. >> they made a profit selling five. >> my guess is if you have a car like that you're probably driving more for local use. >> somebody said we may have a battery that can go much further down the road. >> yoko ono is kicking off the john lennon tour. the highlight is a bus that will tour europe and serve as a
recording studio. a crew of lee technicians. upcoming musicians can make a video. i can't remember the name of this. "we are all water." this was her best song from the classic yoko ono band. the john lennon musical bus will tour the u.s.. and the project is planning to expand to tourists in china. you have comments, questions about the music or anything you see here on "squawk" -- what? >> john used to -- she made john, you can see him, play in this band. and you can see him playing a guitar. you're good, honey. yeah, it's good.
remember paul mccartney. she had to be in the band too. dow a lot of things for your wife. we do. >> mother's day coming up. >> it is. >> be kind to the mothers. e-mail us. if this rally has you scratching your head or maybe frustrated. market historian jeremy siegel after the break. warm weather and may flower can mean one thing. the players championship and the business of golf. stay tuned.
university of pennsylvania. playing out perfectly. right on plan. i remember things. and you're very specific a lot of times about what you think is going to happen. i can't remember what you said this time. i think you said we're going to go up. was that last year at the inning and then we were going to pause? what did you tell us last time? >> well, we thought we would get 10%. >> right. >> but what we also thought would work -- >> you need to raise your price target. >> what we thought specifically would happen is the parts of the market that would really work were the parts sweet spot. so it was going to be the
beneficiary of fed policy. we have had a bounce in cycli l cyclica cyclicals. the question for me, if you can dismiss the mixed data as being almost in entirely attributable to fiscal drag, then you can almost treat it like it's a one-time charge for a company and you move the beyond it. if it turns out that you see an increased impact with obama care, unemployment. you were talking about fannie and freddie earlier. it seems we're still stuck at 2%, then the cyclical will solve. >> are you raising your target or protecting we're going to go
down? can you tell me? >> for now we're sticking with the 10%. >> then you're bearish. jay my, i don't know what to say. breathe on your nails. what did you say finally, 16,000 or 17,000 by when? >> 16 to 17 by the end of this year. that was my target i set at the beginning of next year. and it's playing out very well. i think second half is going to be good. joe, you're making fun of ben bernanke. he can't do any good. either qe doesn't work. or when we see something that is working like housing, he's reigniting the bubble. we take both sides constantly.
it's amazing. there is a whole group of people. they think that bernanke is ruling up the end of the financial world. and other people say it was so bad before. housing is coming back. consumer feels better. it's almost like congress. it's a split decision right now. only time will tell for bernanke. >> the verdict, history is going to be favorable on him. look, of all the developed worlds, the u.s. is the quickest. we are well moving past. look at europe. japan is trying something new. but it's been in a if you think for a decade. housing. the interest sensitive sectors have done well. difficult deposited paying stocks,s the housing stocks.
i think it can drive the second half of the year. and i think the market is looking forward to the gains. >> what gives you pause? anything causing you to temper your enthusiasm? >> i don't want to see how help plays out. it's not number one, but we have to keep our eye on that. >> at this point spreading out the technology and cyclicals was on plan with what you thought would happen. >> absolutely. >> onward and upward. he will be with us the rest of the show. when we come back, the players championship tpc saw grass ready to tee off. and steny hoyer will be
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ponte vedra beach, florida. thapb god you didn't respond to think criticism back then. we look forward to this. it's great. >> we have the best 145 players in the career. in a golf course that challenges every part of the game. tiger said it great. if one part is broken it shows. >> i would just leave i think. you know, you barely survive one. then you have that tee shot. could it ever be another major? how would we figure out whether jack nicklaus, bobby jones, how would think of that work if we made the tour championship a
major. it should be with the worse and with the field. >> well, you know, the way we look at it is the players championship and everything else. we kind of like it that way. >> it doesn't specific le have to be a major. >> this is still a young tournament. phil mickelson, this is 40 years old. a lot of history. but the history is still growing. our objective is just to make it better every year. it has been better every year. we have the best television package of the year in the game of golf right there with the masters in 225. we want to rejoice in it. watch who can master this golf
course this weekend. >> i guess i'm glad tiger didn't win. i thought that was the right move. that's why the rule was put in before they knew about when they made all those comments. tiger penalized almost four strikes and almost won. i wanted to see if he could number one absorb the to shots that were bad luck and the two-shot penalty to see if he could do it. was that selfish to want to see him finish? >> no. i'm with you. i think the interesting thing on sunday, he lost four shots. can he pull this off? there he is talking on the door again. we get wrapped up in the details. but i think the whole thing was
good for golf. >> i agree. the loudest people at the beginning, i didn't hear he very much. and i didn't hear anything since. it must have been the right thing. i'm confused about deer -- i don't want to get into it. i don't know why he wants to bring it up at this point. we don't have a time anyway. unless you have a quick comment? no. rival really bullish about the rest of this week and the wrest of the world. >> we have the same audience. it's all good. we own golf channel at comcast. so it's all good. >> thanks for spending a few minutes with us. >> thanks. see you later, commissioner. up next, more trouble for carnival news line. ♪
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surveillance appears they fell overboard. it is owned by carnival cruise liners, recently plagued by cruising disasters this past february, triumph had no working toilets and limited food after a fire in the engine room. in march last year, a leg tkpwra. and january of last year, costa concordia ran aground. this is another worrying development for that company. of course the search for the passengers continues. >> thank you very much. when we come back, some of the stories making headlines. and market technicals and where you should be putting money to work as earnings season winds
stocks continue to climb to record highs. he we'll tell you how to position your portfolio for the rest of the year. >> the house expected to pass a debt prior prioritization bill. how to reach a compromise on the deficit. >> disruptor of the morning. best-selling books with professional and celebrity they're ators. audible ceo will join us on set. third hour of "squawk box" begins right now. welcome back to "squawk box".
first in business worldwide. our guest host this morning is barry knapp. barry isn't saying, oh, we have a little pull back. he has a 15, 25 target. we are at 1632. so he is on record. right or wrong, he's on record. and i admire him from that. first, though, andrew ross sorkin. >> sticking to your guns. >> not good for all the longs. a big one being costco saying sales rose 4% last month. it was below estimates of 4.5% rise. lower prices for fuel which costco sells at many of its stores. a stronger dollar hurt results. facebook reportedly in advanced talk to acquire waze.
anybody know about this? i've never used it. actually, yes, i have used it. >> of course. what does it do? >> it's a navigation system. it would give facebook the same thing that google maps has. and maybe more. i assume there's additional functionality. price tag 800 to a million dollars. and nokia unveiling a mid-range phone. the company is trying to stop users from switch to go android. >> let's take a look at the markets this morning. equity futures so far barely budged. s&p a point and a half. of course this comes after the market set new highs. nasdaq sitting at a 12 and a half year high. if you look at what happened overseas in asia the nikkei closed down by 0.6%.
so did the shanghai composite. in europe this morning in the early trade there, some bare minimum movements in both germany and london. the cac is down 0.8%. nasdaq and the s&p 500 are on five-day winning streaks. the dow closing at record highs. joining us is for bank of america, merrill lynch. our guest host barry nap is still with us. i would like to start with you. you have just done a survey. you look at the problems markets tend to have when they hit big round numbers like 15,000. what did you find? >> that's right. the first time dow hit 10,000, 28 instances where it was at the 1,000 level intervals. there is a little bit of psych
logical resistance. is this the end of the world? the big sell? i do not think so. hey, we have had a great rally. maybe 15,000 could be a consolidation here. >> take it back to when we hit 10,000. >> that was 1999. we went through and continued to go higher. interestingly, when you look back, the first time we crossed 5,000, mid-90s, went right through. 10,000, right through. now we're at 15,000. the other intervals have consistently given us problems. but it is what it is. >> you say when you look at stocks you still think they are cheap relative to what we have been looking at in past numbers. where do you think prices could go? >> sure. so when you have seen the markets hit peaks in 2000, 2007, the valuation levels on a pe multiple are still cheaper.
dividends yields higher. we still find a lot of value within the equity market. then when you even compare the he could market to the bond market we find equities very good. a lot of people poo-poo this. stocks go higher. we saw that in 2008. we saw it in the 19d 50s and 1930s. so investors that are willing to commit money the the next one to three years, we're finding great value in the stock market. >> you say investors still looking for yield. one of the places they're looking for it or they can find good return, tkpwb yield is pharmaceuticals area? >> correct. most of the market are very expensive efpl rif to history. farming is the cheapest area relative to the market. another pocket that you may want
to seek yield is in technology. tech has not really performed this year. it's starting to improve. we're starting to see the cyclicals improve. we would say to look for yield also in technology. >> so yield in pharma and technology. we have seen technology in the past few weeks doing better. >> on a relative basis, tech is now starting to out doctor perform the market. we believe that's sustainable. our strategist here does have an overweight technology. >> there's a couple things. first of all, health care is overweight for us. tech is overwait for us this reach for yield has been key for us. so i don't agree with any of that stuff. i take issue with comparing the market to 2000, 2007, given we were on the precipice of
monstrous declines. so the richest valuations we have ever had. in the 40s and 50s did out perform. it wasn't until the fed normalized policy that it began. the 50s, 80s, 90s occurred when fed policy was normal, not when they were holding interest rates negative. that is generally massive up certainty, weak economic growth. so until you get to that point it's hard to see your way clear. for us we would be thrilled if the fed started tapering purchase ises and we got a correction. historically that is an opportunity to really put money to work as opposed to that period before they normalize it. the history of this is really more negative for stocks than it
is positive when the fed is intervening to this price 10% in a 3%.5 seemed like a pretty aggressive forecast at the time. we sold buy the highest yielding points. that's all worked. but we're up the same exact as we were a year ago. then it flat ebbed out until the end of the year. that would not be surprising at all. >> barry will be with us the speier morning. but thank you rb for joining us. >> thank you. cnbc global captures informed views on the economy, the latest results are in. and the majority of the council says they see the economic factor is expected. corporate plans remain modest
despite the strong quarter for earnings. koupbl reports salaries and total compensation have increased the last three years. the number one risk to their prospective businesses. 80% believe the fed should not make any change to the rate. what about all the cash they have on u.s. corporations? they expect they will in skraoes expenditures on average by 7% primarily for i.t. and new equipment. >> 42% saying no surprise. 38% say earnings strongly smaller than expected. coming up, house minority whip steny hoyer will talk to us about the depth bill.
audio books with audibles. the only place you can hear dustin hopkins read being there. i have no idea what that is. >> it is awesome by the way. >> 8:40 a.m. >> used to be an author. >> really? >> yeah. great guy. >> as we head to break hraorbgs at u.s. equities future. [ male announcer ] citibank's app for ipad
helps him deposit his checks. jay also like it when mother nature helps him wash his car. mother nature's cool like that. citibank mobile check deposit. easier banking. standard at citibank. welcome back to "squawk box". look at futures. nasdaq off seven. s&p 500 off almost three points. also in the news, barnes & noble shares are jumping this morning. tech crunches reporting that microsoft wants to buy the nook business from barnes & noble for a billion dollars. they already own stake in the unit known as nook media. either company, though, is commenting on that report. >> budget and die prioritization bill is on the floor. the piecemeal approach to
cutting debt is not going to cut it. steny hoyer, house minority whip. good to see stpwhru good morning. good to be with you, as always. >> what should we do? i'm trying to figure out. we did a moratorium on the sales tax stuff for an income company. it was like 2007. was the idea that was a time when these were fledgling companies and we wanted to let them grow and prosper but that no longer makes sense. is that your intention? >> i think that's pretty accurate. it's not a question of taxing them. it's having them as a retail store in a community has to do, collect taxes. of course they get paid a service fee for that. what we're trying to do is even the playing field so that online store in effect that you buy from is in squall competition
with a store that you can buy-in your neighborhood. so i think that's pretty accurate description of where we're going. the senate overwhelmingly passed it. i'm confident it will pass pretty handedly. >> you're confident it will pass? >> i think so. if we put it on the floor. >> that's a big if. >> the whole notion of the economy and taxes, i want to get to it in a specific way. we're trying to figure out what to do with the sequester. we had that bad jobs report before the last one. remember the one before that? it was awful. we all heard it was the sequester. then we had this gang buster jobs report that came out, the most recent one. we added 50,000 in the prior one. i didn't hear anyone saying, wow, the sequester is really hurting job creation.
any talk about the sequester was gone with the last jobs report. i guess it didn't hurt that one. >> it's a good number, though. it's a very good number. >> you and i both know in order to get to where we need to be, we need 300,000 a month for two or three years to get us to a place where we want to be. having said that, it was a good jobs number. the sequester is a drip, drip, drip, not a slam door. and the sequester is going to have a deteriorating effect on the economy overtime. it won't be just shutting down pwoft in dramatic effect. you saw a week and a half ago, two weeks aurbgs the faa had a dramatic effect. the the numbers were not adjusted. >> and then what i was leading to was our guest host is one of a number of people that think that one of the real reasons
that we find a little bit of a swoon here or at least a slowdown was not necessarily the cut backs but the payroll tax hike. maybe even the tax hike that comes with the obama care, i don't know, 4% on certain people, and the high end tax hikes. maybe that has something to do with it. that's why i wonder. even though the internet sales tax, that would still be levied on consumers. is this the time to be raising taxes anywhere? >> well, you know, theoretically, although most people don't pay it. when you buy online you pay the state tax where you are. >> new jersey has done that. new jersey has gotten aggressive. you have to sign off in your state taxes. >> better not to buy on the internet. >> it's a total pain. i wish they would just collect it online. >> if you do it, then the
financial consequence is no different. it's just who collects it, which is the point you make. and i think that's probably accurate. but to joe's point, i think frankly most economists indicate the austerity the europeans imposed was austerity. >> that was tax hikes. >> it was all tax hikes. >> in europe they raised them all over the place. in france they went crazy. >> we have not gone crazy, that's for sure. >> we suspended for a couple of years. that goes to pay the debt of social security. that has to be on a sustainable path. we need to continue to look at that. but the tax, the real tax hike
that was changed substantially was the very wealthy. i don't think it had any effect on the economy at all. i think the continuing disagreement and failure to reach agreement and to give confidence to the economy, to businesses that is evident in washington, i frankly think that is having a dampening effect on the economy's growth. as you well know, i'm a big proponent of getting to a big deal over time. that does not mean, and i want to emphasize, that does not mean substantial cuts or increases immediately. the economy is still struggling. we're still over 7% unemployment. we need to get the economy moving more robustly than that. but i think if we have an agreement between republicans and democrats, have the president sign it, which got us to a credible path to fiscal sustainability over the next 15
years, i think that would have a tremendously positive effect on the economy. i think that's what we ought to do. the parties are so far apart on how to do that. >> steny, news reports that the house republicans are seeking as part of a debt ceiling deal. people are calling it a tactical debt bill. to prioritize government debt payments. what do you make of that? what position does that put the democrats in? >> i think the democrats will be overwomeningly opposed to it. the senate is not going to take it up. and tony was with the bush economic team, says it is essentially a joke. it's not possible. others say it will be a political catastrophe. clearly we call it pay china first bill. the federal government has not
been a priority borrower but simply will pay all of our debts on time in full. that's what the united states continues to be. china being one of the bigest. but we may not pay our veterans, employees, we may not pay other benefits. we may not pay small business people doing business with the federal deposit. that doesn't make my sense for the weightiest nation on the face of the earth. i think it is simply a figure leaf for republicans deeply divided how they want to go forward, as you have seen. and i think that this bill is not a serious effort. >> i'm going to remember you agree with everything tony said. >> i said i agree with him. >> all right.
>> i've got to be very careful with you. >> i couldn't believe you said that. >> we all do. >> we do. tax reform would be nice and a big deal. they are pretending there's a chance. there's going to be no rates coming down. after you finally got them up. it was so hard to get them up. how do you get anyone to agree with doing that on either side. >> tax reform, conceptually everybody is forward because the tax code is not as productive as it ought to be. collectively they are not a good system. >> what about the bowls and simpson. >> i saw this morning in the april where 80 plus percent of the american people think it's a good plan. as you know, i have been in
favor of the approach, the the model. not necessarily every individual item but the model of a balanced on revenues, balanced on dealing with entitles and on spending restraints or cuts depending how you want to call them, on the defense and domestic side of the budget. that's the only way you get to where we need to be. so i'm for that. but in terms of tax reform, the republicans passed the ryan budget. in my view if you took every democrat out of the house and the senate, they could not pass a tax bill consistent with the budget. >> i don't know what you and katy perry have. he couldn't leave her side. >> be careful now. be careful. >> thanks. we appreciate it. we'll see you.
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>> we have a lot going on, including breaking employment numbers. we're a few minutes away from weekly jobless claims. u.s. equity futures down 167 points for the dow. s&p down 2.5 points. "squawk" will be right back. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪
we're second away from weekly jobless claims. rick, the number. >> and the survey says, they dropped another 4,000 from a slightly upwardly revised 327,000. so 323,000 is where we stand as andrew pointed out, these are basically five-year plus low levels. and for the intellectual notion we are going to see a surge in jobs at some point. i'm not sure if that's correct. but we'll take any good news we can get on the job side. claims close to the 3 million
mark. many are looking at it as a pivot. this is the first batch of data all week. seems like most traders down here are more interested in what german data is almost than some of the u.s. data at least for this week. back to you. for more on the data, jeffrey cleveland, senior economist. this is in keeping with the most recent number, isn't it? >> good morning, joe. as rick said, we'll take the good news, right? layoffs down to the lowest level in five years since before the the recession began. that's good news. bad news, it's only one piece of the employment puzzle. it only tells you about layoff activity.
hiring activity sluggish. we don't have an imminent recession but we don't have this robust situation. >> it's funny how the market seemed like it was getting not tired but people were all talking about a need for a pull back. we got a much better than expected jobs number. the economy seems to, i don't know, justify some of the moves in the market. people are looking for these not to go lower but higher. all the things that will impose themselves in the labor market. that's just not happening. to me it means equities could be
somewhat buoyant. >> there's a whole period of time where they say, well, firing slowed down but we haven't started hiring. it happened just like that the flip from firing to hiring dynamic. that's not a firm call. if we're close to inflection, it brings purchases back into play. >> what do we need to see. our firm's call doesn't happen until 14. were we to get surprises in payrolls for a couple months in a row, that will be on the table quickly.
that will be the cause of a correction. >> what happens to the bond market? >> you will get where the the back end sells off harder than the front end. the curve could steepen 40 or 50 basis points. >> santelli? >> yeah. >> you got your buddy -- what's his name? watt. and you've got record profits at fannie. god, that's great. i love that. it's a great idea. the government backing and everything. and guaranteeing the mortgages. and the fed on full bore. nothing can go wrong with this, can it? >> no, no. the health care roll out,
housing industry, financing, education. it's all going to have a rather large fingerprint by the federalis. you can draw your own conclusions. i love listening to your guest that sounds like a pit trader. i don't know what his name is. i like that voice. a lot of people down here sound like that. but 93, 94, 95, not only was the fed tightening and jobs were explosive, if i do recall, that's when a teary-eyed william jefferson clinton was on tv saying, you know, oh, my god, i can't believe i lost both houses. they figure in in the fiscal and political side. there was a plan. there was some action. and there was the type of action that doesn't dictate that we can't all just fend or
ourselves. here's the size coke you drink. there's where you get your driver's license, stints and casts. we actually had some confidence in one of the best class of citizens ever to inhabit a country, do great things, create great inventions. i really think there's so much more to this mid-'90s growth story that everybody tends to ignore. >> rick, that's a great point. it's barry tphap. i was in equities for a long time. 1995 the feds doubled from 3 to 6. in '96, the curve was inverted. they were threatening to shut down the government for the whole of the year. and the stock market went up. once we got to normalized policy and we started to push all that stuff behind us, that's when the the market responded favorable.
it is taking it from 10 plus. we sort of had a similar dynamic in '95. we still have this longer term problem. there's real sepl hraeurts. we have to get to the point where the fed stops pushing. >> thanks, rick. that was good. jeff, thank you. appreciate it. and barry will be with us the rest of the show. >> we talked about fannie mae of the mortgage finance company. announced it will pay 54 billion in dividends after a record profit in the first quarter. diana just got off the phone with the company ceo and he said
the following in part, there is a risk that lawmakers will look at our profitability and conclude they don't need to take action to reform the housing finance system. i believe that would be a big mistake. we're going to have more from diana throughout the day. that's an important point. >> that is really interesting. >> huge mistake. the the average loan to value is 68. 32% down. it all comes the price of risk they're charging, the fact that banks don't know their capital roerplts. we haven't settled dodd/frank, basel 3. you're not getting credit to first time home buyers. this is investor purchases. it's not a "game change"er until you get credit to the first time buyer. and the mortgage credit market is 95% controlled by the
government. that's always led to rationing in every instance in the history of this country. the government takes something over, it's rationing. >> diana will have more through the rest of the day. we'll talk more about it. when we come back, a disruptor best-selling books with celebrity they're ators. audible is the alarmest producer and seller of spoken word entertainment. the ceo donald katz will join us after this. [ male announcer ] with free package pickup from the united states postal service a budding artist can ship like a big business. just go online to pay, print and have your packages picked up for free. we'll do the rest. ♪ this is no time for lollygaggin', lad. the chickweed and the dandelions are wreakin' mad havoc!
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>> welcome back to squawk. audible.com the largest producer and seller of digital audio books in the world. i would be remiss if i didn't tell the audience that you wrote a book called just nike. what was the big -- what you would think as the bigger book. >> a book about sears. one of the first you are there
inside the heads of a corporate environment. >> tell us about audible.com. more people now listen to books. i said when do you have time? oh, i listen to it. i have to admit i don't. maybe you listen to books. >> i keep thinking about it for the drive home but i haven't done stkphreut where did the idea come up for you to this? >> i was supposed to write another book about the digital media revolution 20 years ago. there wasn't much to write about except for people saying what was going to happen, which wasn't my style. i became much more aware of compensation technology. and it suddenly came to me that the in efficiencies i saw as a publishing model would be addressed by digital distribution. >> were you into audio books? >> i did. i jogged in riverside park with
a belly packed full of tapes. when i realized there was a new network and you could theoretically never be out of stock, and take the packaging costs out i kind of got an idea, my college roommate and i sat down. i said we have to have a way to liberate the content from the telephone which was then a concept. we're talking 1994, 1995. and thus, we invented the first digital audio player and commercialized it in '97. that of the first thing we did. >> your business, by the way, you made a fortune. you sold your business to amazon.com. is this competition? are other companies doing this? >> other companies in the game. we have lots and lots of producers around the country. we are the largest producer of audio books. in the traditional media world,
the content world and the distributor. this was a category that really needed to be changed. we have were taken an industry where people would buy these to keep the kids why oat vacation. and our members, millions of them, use them every day. they do 18 books a year and they stay a long time. it's a subscription model that really works. >> don, it's not just the technology but taking well-known actors and having them read. >> absolutely right, becky. we have repositioned it as fantastic story telling told to you by these brilliant actors. it donned on me, movies are based on text. why wouldn't books be some of the greatest scripts of all time. we hire claire danes or ann hathaway with read you a book. we created an entire industry. we employ a lot of actors and we
have broken the business models. >> how much do you make for reading something like that? >> we have readers broadway actors you probably haven't heard of making several hundred thousand a year. >> gyllenhaal just did gatsby. >> he will get paid a nice wage. the great actors love it because they come in and have incredible control. they don't have to worry about hair and makeup. >> joe, i think you should do high acts road to surfdom. >> he can do -- what's the one with george c. scott. patton. wouldn't he be great? >> that's a good voice.
>> what's the biggest barrier to entry. being with amazon, having the actors all seem like big moats around your business. there has to be a way for somebody else to take the same technology and try to do it too. >> we focus on the customer. being part of amazon was perfect. we think the same way. think big. we keep putting out really interesting new inventions. we have an on line marketplace that you actually can buy and sell the rights for audio. you can produce it on one side. and we market like very crazy and frankly, you know, most of our members, only 4 of 10 ever bought an audio book before. so they habituate. >> real quick, book publishing. some people say it's in decline. amazon has not helped things but hurt things. what's your position on that? >> it comes up all the time. i was a writer. all i wanted to do is be read.
the probably know the in efficiencies of going on big tours and you never see the books. this digital is all about what matters. the writer and actor in this case, the reader and listener on the or sides. new enter mediation help that. but to call the industry the publishing intermediaries was probably never the right idea anyway. >> don, thank you for coming in. >> thank you very much. >> would you do "fifty shades of grey"? >> why? do you think i have some experience there. >> i would just like to hear how you would read it. >> this is how i would read it. jim cramer ahead of the opening bell. we used to live with a bear.
to say how good they are. i used to say that, too. i spoke at some conference years ago. look -- the salt is to raise money. i thought that the piece in the "new york times" today was very on point about that conference and instead i think the real actions in the market themselves and not trying to market yourself. >> oh, man. well said. let me ask you something else. in a different way. that is, i don't noi know if i'd call it unanimous, but people feel like we're on the precipice of something that's not that great, a lot of these hedge fund guys. like there's some come uppance or some chickens out there. do chickens fly? i don't know but they're flying around, they're ready to roost. almost every single guy thinking that, maybe don't get out quite yet but there's something on the horizon that's very worrisome -- yeah? >> yes. other than lazslo bree who was
not there, i think most people have tremendous contempt for the market. i think the people -- big guys haven't made the money this year so it really behooves them to talk the market down. they've got to say that. they're so far behind in the market, they needed to go down big and sometimes that's why you try to talk it down but the market doesn't seem to want to do that. >> i like that. so we can throw some of the masses of the universe, hedge fund guys, with some of the sell fund guys. barry is at least saying what he thinks rather than, at any time there could be a 2% to 4% constructive long-term medium -- the stuff we hear all day from the sell side guys. >> i totally agree with you. i'm looking at stocks most heavily shorted. barnes & noble, 36% short. tesla, 46% short. green mountain, 27% short. groupon, 12% short. those are all really smart guys
betting against those companies. lots of luck! >> yeah. for what's been happening so far. i guess we got to go, jim. we'll tune in at 9:00. talk more about that "new york times" -- i'll talk to becky. i have to recuse andrew whenever i talk about "new york times" pieces anymore but i got irritated by that piece as well. talk about it at 9:00. >> there's a little teaser there for you. coming up, we got the winner of the annual investment contest. colombia business school student pitched the winning investment idea to judges. simeon mcmillan is here to take the set and talk to us. [ male announcer ] this store knows how to handle a saturday crowd.
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investment idea to showcase that idea in front of the world's leading global investment minds. the winner must then share the stage with industry leaders and present in front of 3,000 people at the sohn investment conference. on set is the winner of this year's competition, simeon mcmillan. most of these people who put in for this are professionals. you're an mba student at columbia. congratulations first of all. i was saying off air, you're going to stay in school? >> yes. absolutely. i have a lot of loans to pay off so not quitting my day job quite yet. >> the winning idea, tribune company. why? >> i think the company has a good portfolio, a broadcast television assets. think there is a lot of upside in the cable network, wgn america and i think they're underfollowed by the street. they're traded over counter. i think that investors should give the company a second look. >> you think this company's got to be held together or split up? >> they made it pretty clear they're going to be divesting some of their newspaper assets and they'll sell off their steak
in the food network but going forward they're going to grow as a cable and television broadcast. >> wgn televises cubs games. >> i'm a life-long mets fan so i understand very well actually. >> do you have an interest in media companies broadly or you were just looking for one idea and tribune -- how did you get there? >> i mean it is my most compelling investment idea in my portfolio but i do have interest in media. i start off as a media analyst at goldman. >> you have a portfolio yourself that you still -- >> yes. >> it is just for your own funds? >> exactly. yeah. on the side. >> what are you going do when you graduate? >> i'm looking to move in to long/short equity investing. i'm in first year right now so i have a ways to go but that's the plan for right now. >> i'm thinking after this program today that first year might be the last year. you might be on your way. >> no, i'll still be enrolled this fall. >> good luck with finals. congratulations on the big win. that's very, very exciting.
our thanks to -- we got 15 seconds, barry. thanks for being a guest host today. we're also going to remember what you said. you might be right. 1,525 on the s&p. squawk on the street is next. the job market showing more signs of improvement. you see claims coming in at a five-year low. imhe's carl quintanilla with jim cramer live at the nyse. busy morning shaping up. david, what's coming up? >> we're going to have a good group of hedge fund managers this morning. credit, credit, credit. it's funny we talk so often about equity hedge funds but there is a